Job cuts loom as EADS changes name to Airbus

Tim Hepher, Cyril Altmeyer

6 Min Read

PARIS (Reuters) - EADS EAD.PA will take the name of its flagship brand Airbus and target higher profits by combining defense and space units, Europe’s top aerospace group confirmed on Wednesday, in a move that could involve job cuts.

File photo of an A380 aircraft seen through a window with an Airbus logo during the EADS / Airbus 'New Year Press Conference' in Hamburg January 17, 2012. REUTERS/Morris Mac Matzen/Files

Nine months after bowing to political opposition to his attempt to merge with UK arms firm BAE Systems (BAES.L), Chief Executive Tom Enders declared civil jets the main “growth engine” for EADS investors, who pushed shares to new highs.

After unveiling a strong batch of commercial earnings that included a rise in Airbus order targets, Enders did not rule out job cuts in the group’s 45,000-strong defense and space operations, which will be based in Germany.

“It (the reorganization) means some real restructuring, but we are forced to do it: the defense business is ... shrinking in Europe,” he said.

The company warned the move could lead to restructuring charges later in the year - a standard sign of layoffs ahead. But it also deferred politically sensitive decisions until after German elections in September by promising a detailed review.

The changes will come into affect starting from January 1, allowing time for what could be lengthy talks with unions.

“To keep the company economically successful, the restructuring must take place in a socially acceptable way,” Ruediger Luetjen, head of the company’s European works council and a representative of trade union IG Metall, told Reuters.

STANDOFF

The company is already on a potential collision course with the German government over the allocation of jobs for Airbus A350 jets, in a dispute that shows few signs of easing.

People familiar with the matter say Airbus is unwilling to give guarantees over the share of work on the latest jet as long as Germany holds back a development loan. Berlin, for its part, wants guarantees about work on future Airbus projects.

“The German government will work closely (with EADS) during the upcoming restructuring process and will place great importance on Germany’s interests as an industrial location,” Economy Minister Philipp Roesler said.

EADS was formed in 2000 from a merger of French, German and Spanish assets that incorporated passenger jetmaker Airbus, founded three decades earlier and now a global rival to Boeing.

The name EADS - originally European Aeronautic, Defense & Space Co - was never widely recognized and the group has long discussed changing its name to Airbus. But politics have until now made it difficult to tinker with Europe’s leading symbols.

Enders hopes the decision to unite under a globally recognized brand will galvanize the rest of the business from space rockets to helicopters and encrypted communications.

EADS will be called Airbus Group and will combine defense and space activities in one division together with Airbus Military transporters, currently twinned with passenger jets.

Eurocopter, the world’s largest commercial helicopter maker, will also be renamed Airbus Helicopters.

‘NOBODY AUTONOMOUS’

The decision to co-opt the Airbus brand may test a delicate balance between ‘old EADS’ and the Airbus division, where CEO Fabrice Bregier is widely seen as Enders’ future successor.

Industry sources noted the unit is keeping the one-word name “Airbus” rather than a more hierarchical divisional title like that of its direct counterpart, Boeing Commercial Airplanes.

But by uniting defense and space and rallying behind one brand, EADS is adopting much of the look and feel of its rival, where planemaking has traditionally had less independence.

Enders dismissed media “rumors” about such sensitivities and is seen likely to avoid clashing with Bregier. But he ruled out a return to fiefdoms that beset EADS under past managements.

“Nobody is autonomous on this planet. I have a board and the same goes for division heads in the group,” he told reporters.

Powered by commercial demand for Airbus planes, second-quarter EADS operating profit rose 23 percent to 887 million euros on revenue of 13.945 billion, up 3 percent. Airbus makes up two thirds of sales and is expected to remain dominant.

Analysts were expecting profit of 839 million euros.

EADS raised the 2013 order target for passenger jets by 25 percent to more than 1,000 aircraft, as reported by Reuters earlier in July. Other targets were unchanged.

Shares in EADS closed up 1.4 percent at 44.89 euros.

The new order target puts Airbus on course to beat its 2012 gross order tally of 914 jetliners. Industry sources say business in the pipeline suggests it could reach 1,200 orders.

Airbus is battling to regain leadership of the $100 billion annual jet market after Boeing grabbed top spot last year.

Strategy chief Marwan Lahoud said all divisions would join efforts to increase margins to 10 percent by 2015, from a group average of 5.6 percent in the first half of this year.

That would bring EADS roughly in line with Boeing, though the comparison is blurred by accounting differences that allow the U.S. company to spread some costs over a longer period.

Enders said testing for the A350, the newest Airbus jet, was going “very, very well” but the project remained challenging.

Additional reporting by Joern Poltz, Editing by James Regan and Anthony Barker